Inability to acquire financing delays downtown development

Developer says residential units, hotel remain part of the plan

Construction of a hotel and mixed-use development on a prime piece of property in downtown Rockville will be delayed at least one year because the economic downturn has made it difficult to obtain funding to build, the developer said.

The Rockville Planning Commission two weeks ago unanimously approved a one-year time extension for construction to begin on Duball LLC's development on East Montgomery Avenue.

Plans for the development, which have been approved, include 485 residential units in two buildings with retail shops on the ground floor, a parking garage and a 175-room hotel. The buildings will take up what is now the parking lot in front of the Regal Cinemas.

"We have run into a brick wall as it relates to financing, probably no surprise to anybody that either listens to the radio or reads the newspaper," Marc Dubick, Duball president, told planning commissioners on Jan. 28.

Plans for getting a loan with Wachovia stalled when the bank was bought by Wells Fargo last fall due to the unstable lending market, Dubick said.

"[Wells Fargo] is not yet equipped to make a decision on this, and it's probably premature, but these things take time," he said. "These are very large projects."

The use permit was initially approved in May 2007 and amended in October of that year to include the hotel. Duball's use permit was set to expire in May. According to the city's zoning ordinance, construction on an approved project must commence two years from use permit approval.

This is Duball's first of two one-year time extensions allowed under the ordinance.

Commissioner David Hill questioned the developer's previous sense of urgency to get the addition of the hotel approved in October 2007. The developer had said there was a risk of losing the hotel if it was not approved right away, Hill said.

The plans still include the hotel, Dubick said.

"Frankly, of all the asset classifications, hotels are in many respects historically impacted the most by economic swings and so it does alarm us somewhat," Dubick said. "When the financing markets come back, that might be the toughest component to finance, but as we stand here today, our modus operandi is pretty clear. We have a mixed-use project, we need to get it all financed … and the hotel is a component of that. We believe there's a void in the market for hotels and that's not going to change."

Dubick told planning commissioners that Duball is about 60 days from applying for its building permit and intends to have all necessary approvals in place by the time it is able to obtain a loan.

"We strongly feel that this is the type of project that should be built, will be built, and that the lenders will give full consideration to when they're back in the business of lending," Dubick said.